What Does Liability Insurance Actually Cover in Your Vacation Rentals?

Managing a portfolio of short-term vocational rentals can be fun, rewarding, and lucrative. However, one bad guest can wreck your profit margins, especially if you don’t have the right insurance coverage. 

If you’ve been asking, “What does liability insurance cover in my vacation rentals?” you are in the right place. Here’s everything you need to know about this important type of policy, including what it does and doesn’t protect you from. 

The Basics of Liability Coverage for Short-Term Rentals

Liability insurance is a type of policy that provides financial protection in the event that you are found legally responsible for causing harm to someone else or their property. In the context of vacation rentals, liability insurance is designed to cover incidents that occur on your property and result in bodily injury or damage to guests, visitors, or third parties. 

Here are the three main types of expenses that these policies cover: 

Bodily Injury

As a short-term rental manager, one of your biggest fears is someone getting hurt on your property. Even a relatively mild injury can expose you to serious liability and thousands in unexpected expenses. 

Fortunately, a great liability policy can cover medical expenses incurred by guests or visitors who are hurt on your property. Generally, these policies protect against injuries caused by either negligence or accidents. 

For example, if a renter slips and falls on a wet floor on your pool deck and gets badly hurt, the policy will typically cover any expenses related to their medical care and rehab. 

Property Damage

Liability insurance also provides coverage for property damage that occurs on your vacation rental property. The protection extends to guests’ personal belongings and the house itself. 

For example, if a renter accidentally breaks a window or damages furniture in your rental, the policy would typically cover the cost of repairs or replacements. 

Legal Expenses

In addition to covering medical bills and property damage, liability insurance for vacation rentals may also provide funds for legal expenses that you incur while contesting a claim or lawsuit. Some covered expenses may include attorney fees, court costs, and settlement payments. 

As a short-term rental property manager, the threat of a lawsuit is always looming. All it takes is a split-second incident that leaves a guest or their visitor injured, and you could face tens of thousands in legal expenses. Therefore, it’s important to protect yourself and your portfolio with a great policy. 

What Does Liability Insurance Cover in My Vacation Rentals? 

Now that you understand the basic coverage categories, it’s time to unpack some of the specific incidents where a liability policy could come into play. Here are some common coverage questions that the Safely team fields when discussing coverage options: 

Does Liability Insurance Cover Bed Bugs?

Bed bugs probably aren’t the first (or the second) thing that comes to mind when thinking about a liability insurance policy. While that’s understandable, these difficult-to-see little pests could tarnish your reputation and cost you thousands in cleaning fees and furniture replacement costs. 

Fortunately, you can protect yourself from the financial implications of bed bugs with a great liability policy. Safely offers customizable short-term rental insurance so that you can choose your own protection levels. Explore our offerings and obtain an instant quote today.  

Does Liability Insurance Cover Injuries to Friends of Guests?

Yes, liability policies can cover injuries to friends of your renters. However, it’s important to carefully review the scope of your policy to make sure. While some agreements may extend protection to anyone a renter brings over, others might provide little to no coverage.

If you want to cover friends or guests, make sure to add this to your policy. However, keep in mind that each add-on drives up your total policy costs. On that note, you can pass some of these expenses onto your guests by including an insurance fee in your rental agreement. 

Does Liability Insurance Cover Guest Car Theft?

Generally, your renter’s vehicles will be protected by the umbrella property damage coverage included in a general liability policy. There may be some exceptions, though, so it’s important to thoroughly read the terms and conditions of your agreement.

For instance, your policy may protect a guest’s vehicle if it was parked on your property but not if the renter positioned it in the street. If your coverage has such an exception, you should encourage your renters to park their vehicles in the driveway or another designated area. Also, make sure to mention how many cars your rental can accommodate so that guests understand the parking situation before booking a stay. 

Does Liability Insurance Cover Structural Damage Caused By Renters? 

Yes, insurance providers typically cover your property under a liability policy. However, it’s important to ensure you have enough coverage. Otherwise, you could get stuck paying the difference if a renter severely damages your home. 

Safely makes it easy to get enough protection. As a Safely client, you can get up to $1 million in protection against guest-caused structural property damage. With a $1 million Safely policy, you’ll enjoy peace of mind knowing that your assets are protected from anything that comes your way. 

Limitations

The “limitations” section of your policy represents one of the most important portions of the document. This section outlines any exclusions and limitations to your coverage.

One of the most common limitations pertains to coverage amounts. These provisions cap the maximum amount that your company will pay for a covered claim. For instance, if your per-person bodily injury claim limit is $100,000, you’ll have to cover any expenses that exceed that threshold. 

Why You Need a Short-Term Rental Policy

As a short-term rental property manager, having a liability policy is non-negotiable. It provides essential protection against the financial consequences of accidents, injuries, and property damage that may occur on your property. By understanding what your policy covers and carefully selecting the right limits, you can protect your guests and your bottom line.